Mainstream Republicans, which I co-chair, recently voted to endorse the No position on Initiative 1125, Tim Eyman’s anti-tolling measure. Although at odds with our friends at the State GOP, I agree wholeheartedly with that decision. Why? Because I-1125, if passed, will sound the death knell to a free-market approach to reviving Washington State’s economy.
Our country is struggling with the worst economic slump since the Great Depression, and Washington State has fared no better than many other states. In fact, the Governor has called a special session of the Legislature to address yet another gaping hole in our budget.
But believers in the power of free markets know that the best result that can come from the special session is to stanch the bleeding. We understand there is only one permanent way back to prosperity, and that is to unleash the wisdom of the law of supply and demand in the market to allocate resources, and the power of the private sector to create jobs.
In a state where trade, tourism, manufacturing, agriculture and innovation are our economic lifeblood, our future competitiveness – and economic viability – depend on our ability to develop a transportation system that can move goods and workers efficiently around and through the region.
The Washington Policy Center (WPC), a free-market think tank in Seattle, declined to take an endorsement position on I-1125, advising voters in its analysis to consider and prioritize the measure’s many aspects in coming to a decision. At an earlier transportation conference in May, the WPC found that a key priority for our State is reducing congestion: “Competition is rising …with more than 200,000 Washington jobs at risk…. Washington must become more competitive and create a quicker way of moving commercial trucks in and out of the major ports in Seattle and Tacoma.”
An important market mechanism that 1125 would remove is the option to use variable-rate tolling to manage congestion. It is, in fact, a valuable tool for efficient utilization of scarce transportation resources, as Attorney General Rob McKenna recently said in explaining why he would vote against I-1125. By setting different prices during peak times, we give drivers an incentive to move into shoulder times around peak-hour traffic, or take alternate routes – thus easing a measure of congestion for some who don’t have those options.
This is precisely what the private sector does to spread demand across supply opportunities. It’s why movie-ticket prices are lower during matinee times and cell-phone minutes are less expensive on evenings and weekends. Free-market advocates understand that consumers are the most capable of determining when to use a service or product that affects them. The result is a system that’s more efficient for everyone. Efficient use of economic resources is a bedrock principle of free markets and should be considered by state government as well. Initiative 1125 undermines the ability of our state to regain its economic footing and create jobs by turning those principles on their head.
The result, if 1125 passes, is that it will delay critical projects for years. The respected Washington Research Council recently issued its policy brief on 1125, with this summary statement: “I-1125 would make it more difficult to pay for transportation projects that are needed statewide, and its restrictions on tolling would reduce the effectiveness of tolls. In all, the initiative would significantly impact the state’s transportation plans.”
Nothing drives up the cost of construction projects more than delaying them, as years of dithering on other long-debated and thus long-delayed regional projects attest.
What our state does need is a coherent tolling plan as part of an overall funding package to enable us to fund major projects such as the 520 bridge, SR 167, the North-South project in Spokane, a new route across the Columbia River in Vancouver – all vital interests our state needs to stay competitive and create jobs.
I-1125 creates roadblocks to all of them.
For example, a viable tool in any funding package is to use bonds repaid strictly from tolls rather than bonds that have to be backed by higher gas taxes or the state’s badly strapped general obligation capacity. Toll-backed bonds put the financing on the same footing as private sector “project financing.” Simply put, a specific project is funded, and revenues associated with that project pay for that project. One of the attractions of using project financing for a public project is that the real merits of a project will have to be tested, rather than simply assuming a project will go ahead because the state will always stand behind it.
Of course, a key element in attracting bond investors to those terms is the security of the toll-revenue promise. That’s why the “legislative approval of toll setting” in I-1125 is such a deal killer – and why no other state in the nation does it. It totally wipes out any prospect that a private investor would offer equity into a project. I-1125 is a sure bar to public-private partnerships for transportation investments in Washington State.
Initiative 1125 reflects a hodgepodge of ideological issues its backers have with transportation policy and policymakers. Some of those issues reflect legitimate concerns with governance that do need to be fixed – but not in a one-size-fits-all initiative that does nothing to solve the real transportation problems that are preventing our private sector from leading us back to economic health.
The bottom line for free-market conservatives: I-1125 slams the door on the power of the market to make the most heavily travelled highways more efficient by using tolls as a pricing technique to encourage off-peak use – when roads are not crowded. It takes off the table the use of public-private partnerships to invest in and build transportation improvements because firms will not invest if their return is subject to frequent legislative approval of toll adjustments. It’s simply a game-ender for tools many conservatives place great hope in for improving our transportation sector.
Don’t be fooled. Vote for the market. Vote for public-private partnerships. Vote for jobs.
Vote NO on 1125.